(
December 29, 1999
) --
Robert has provided an excellent summary of Social Security's problems and has helped us frame the questions surrounding the program. The first question, which receives most of the attention these days, is "Can Social Security be saved?" The second question, which Robert touches on at the end of his argument but which is not always stated straightforwardly, is "Should it be saved?"

Let's begin with the can-it-be-saved question. There are a wide variety of options available. For example, while the age of eligibility for full benefits is slowly rising from 65 to 67, that could be raised further, and faster, given our increasing life expectancy (when Social Security began, average life expectancy was below 65). The cost of living adjustments (COLAs) that increase benefits by the rate of inflation could be reduced; benefits could be means-tested, so that at least the wealthiest Americans would no longer receive government checks; the "tax base," which is the amount of income subject to FICA taxes (currently $72,600), could be raised (or better yet, the upper limit eliminated, with some reduction in the actual rate itself); and finally, some funds could be funneled to private accounts. A version of this kind of reform was also spelled out in Part 4 of Al Levit's series.

A combination of these kinds of reforms would certainly extend the life of Social Security for several decades, at least. Of course, some may argue that we need a "permanent" solution, but given the number of variables that can impact the long-term projections of Social Security's finances, it's not realistic to expect a silver bullet that will "save" the program for all time. After all, the Social Security trustees Robert quoted earlier are very cautionary about the long-term projections they make, given how easily they can change.

Which leads us to the second question: Should Social Security be saved? To answer this, it's important to decide what we want from the program: mandated individual savings, or a collective insurance program that reduces elderly poverty? This choice hasn't always been a part of the public debate, but it should. From the time President Franklin Roosevelt created Social Security, it has rested on the illusion that it is a program of individual savings, and it's past time we get beyond that illusion. As the Washington Post has noted, "By design, Social Security involves massive subsidies from the next generation of retirees to this one� from two-earner couples to one-earner couples, from high-income earners to low, from the able-bodied to the disabled�. A mandated savings and investment plan can't do what Social Security does today." Are we willing to keep this redistributive aspect, and focus on reducing poverty among the elderly, or are we only concerned about whether you or I are getting a "bad deal"?

Incidentally, it's revealing to compare the statistics that Robert and I used in our opening arguments: I discussed the collective impact Social Security has had on the elderly as a whole, while Robert refers to the returns on investment for young individuals. Both choices reveal our priorities. The goals of maximizing individual returns while also looking out for our senior citizens are not necessarily mutually exclusive, but to achieve both we need to be more up-front about each.

The reforms I mentioned earlier include the use of private accounts, while continuing to maintain some taxes for Social Security in order to provide direct benefits to those who need them. A program like this might be able to provide better returns for individuals, by routing a portion of their payroll taxes to private accounts, while at the same time maintaining a safety net to prevent and reduce elderly poverty. Shouldn't we be able to afford and implement such a program in our wealthy and innovative country? I think so, and I think we will, after a lot of posturing and speeches by the politicians. And I think it will still be called "Social Security."